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Crude Oil Continues to Collapse to Multi-Year Lows

March 18, 2020 at 9:20 by Vladimir Vyun

Prices for crude oil extended the slump to new multi-year lows today. West Texas Intermediate crude was trading at the lowest level since 2003, while the Brent grade was near the lowest since 2016. Futures opened sharply lower at the start of the week after OPEC+ negotiations about deeper oil production cuts collapsed as Russia refused to reduce its output any more. Since then, Russia and Saudi Arabia engaged in a price war, and Saudis also talked about ramping up their production. The potentially devastating impact of such actions on the oil market prompted Iraqi oil minister Thamer al-Ghadhban to call for an emergency OPEC meeting.

The agreement to limit oil production was the major factor supporting oil prices for the past three years. Without it, crude was going to trade significantly lower even if everything else was good. But the timing was especially poor considering that fear of the COVID-19 pandemic gripped markets, prompting traders to dump riskier assets, scrambling for safer ones. Crude faces the threat of oversupply, while demand is expected to be low due to a potential global recession. Travel bans in various countries are especially devastating to crude, severely limiting fuel consumption.

Futures for delivery of WTI crude oil in April sank by $0.87 (3.23%) to $26.08 per barrel as of 9:19 GMT on NYMEX today. May futures for Brent crude tumbled by $0.47 (1.64%) to $28.26 on ICE today.

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